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Thread: Is a co-ordinated Central Bank induced Market Melt-Up Imminent ?

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    Default Is a co-ordinated Central Bank induced Market Melt-Up Imminent ?

    from


    (snip)"Why stocks may post surprising gains in the months ahead:

    1.The pattern of risk-off followed by central bank-induced risk-on is alive and well.
    2.Inter-market relationships look similar to pre-melt-up period in 2009, 2010, 2011.
    3.The European Central Bank (ECB) is readying for serious market intervention.
    4.More money printing is coming from the Fed.
    5.Oil and commodities have perked up according to the pre-melt-up script.
    6.China may respond to weak economic data with more stimulative actions. According to a CNBC report published on Friday, "action by China's central bank could come as early as the weekend".
    Over the next few weeks, another Fed and ECB liquidity party may be coming to a market near you. Will you recognize the clear pattern below this time?

    ■In late 2008/early 2009 the financial system was on the ropes. The central planners stepped in with TARP, taxpayer bailouts, and massive amounts of money printing. Stocks took off.
    ■In early July 2010, fears of deflation had investors running for the exits. The Fed hinted at QE2 in late August. Stocks took off.
    ■In the fall of 2011, with Europe on the edge of the abyss, the European Central Bank offered unlimited three year loans to banks, making the Fed look like a money-printing piker. Stocks took off.
    See a pattern here? In 2012, the Fed has again hinted at another round of quantitative easing or QE3. In 2010, Mr. Bernanke delivered the knock-out blow to the bears on August 27 during his Jackson Hole speech. For those scoring at home, Mr. Bernanke's annual visit to Jackson Hole is just a few short weeks away. Many took the "QE won't have an impact" stance in 2010. The S&P 500 gained 28% after QE2 was signaled at Jackson Hole, which in our mind is an 'impact'.

    The real and potentially melt-up-inducing news has been coming from the European Central Bank. On August 6, we noted a few European hurdles still need to be cleared before another round of massive money printing can be launched. Coupled with resistance the S&P 500 faces near 1,400, the door may be open for one more scary pullback before central banks kick off Monster Rally 2012.

    Since we are at least a few weeks away from Fed and/or ECB action, the Europeans have been sending up numerous "don't mess with us" warning flares to calm bond market waters. The most intimidating comments for the bears came from Michael Meister, deputy parliamentary leader of Angela Merkel's Christian Democratic Union party in Germany. From Bloomberg:

    Draghi's statement that the ECB is prepared to step in to help lower borrowing costs in Spain and Italy sends a warning to investors not to speculate against the single currency, said Meister. He cited the example of George Soros, who made $1 billion in 1992 betting the U.K. would be forced to devalue the pound, saying similar such bets against the euro would fail. "If Mr. Soros tried it with the British pound, he shouldn't try it with the euro after this reference by Mr. Draghi," Meister said. Draghi sent a message to "all speculators who think that they can speculate against the euro: My dear friends, be careful, there's somebody in the background who may join the game and his pockets are deeper than your pockets."

    On the heels of the "deeper pockets" reference above, we have adjusted a popular adage for our centrally planned financial system:

    Fool me once, shame on you; fool me four times, shame on me."(snip)

    (snip)"Meanwhile, the European Central Bank (ECB) is preparing to address (at least in the short-run) the biggest bearish drag on European shares. From Reuters:

    The European Central Bank is determined to bring down excessive risk premiums for member states in bond markets and should be ready to act very soon, ECB governing council member Christian Noyer said on Thursday.

    From an intermediate-term perspective, we like China (FXI), emerging markets (EEM), Germany (EWG), and even have a small stake in Italy (EWI). The markets are vulnerable to a pullback in the short-run, but the longer-term picture still looks positive. Greece is one candidate to derail our year-end rally hypothesis.

    As described in a series of October 2010 "how QE works in the real world" videos, quantitative easing is designed to "pump up" asset prices by injecting money into the global financial system. The global financial system is a politically correct term for global brokerage firms, not traditional banks where the Fed's printed money will "just sit around doing nothing".

    The melt-up/melt-down pattern has been established. With a big wild card in the form of Greece, an open mind paired with flexibility remain important from a risk management perspective. At some point, the central bankers will print and the deflationary forces will be too strong to overcome. Based on the set-ups described in the video above, we have not yet reached that point. Melt-up 2012 could begin sometime in the next six weeks."(snip)


    The point to keep in mind, of course, is that central bank money printing doesn't actually cause the 'value' of stock shares, or a barrel of oil, or a bushel of corn, or an ounce of gold, to increase 20%. Instead, that money printing causes the 'value' of the paper currency being printed to drop, while stocks, oil, corn, gold etc. 'hold' their value as the 'purchasing power' of the currency depreciates 20%. This means that stock shares which are priced higher in terms of a devalued currency essentially results in a 'break even' situation. While not the actual 'winning situation' that mainstream financial media typically paints, this is far better than earning <1% on a paper currency via a bank deposit while the currency depreciates 20% !!!

    I would also add that US pressures for the FED to produce some apparently 'positive' economic news over the course of the next 3 months may push the US FED into a co-ordinated money printing program along with the ECB ( and perhaps the Chinese central bank as well ). And the date to keep in mind is the September 12th Jackson Hole Economic Symposium ... which has been Ben Bernanke's traditional venue for QE announcements.
    Last edited by Melonie; 08-11-2012 at 11:01 AM.

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    Default Re: Is a co-ordinated Central Bank induced Market Melt-Up Imminent ?

    You're making stuff up again. When the dollar loses purchasing power, the result is inflation. When inflation is high, stocks generally do poorly. In the 1970's we had high inflation and the stock market was relatively flat with a few dips. If 3 1/2 years ago you were thinking about buying a house, a car, or a flat screen television; but instead chose to hold off and put that money into the stock market instead, you wouldn't just break even. The value of your stocks would be a lot greater today than the value of that same house, car, or television. You just do not want to acknowledge anything positive about the economy.

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    Default Re: Is a co-ordinated Central Bank induced Market Melt-Up Imminent ?

    Quote Originally Posted by eagle2 View Post
    You're making stuff up again. When the dollar loses purchasing power, the result is inflation. When inflation is high, stocks generally do poorly. In the 1970's we had high inflation and the stock market was relatively flat with a few dips. If 3 1/2 years ago you were thinking about buying a house, a car, or a flat screen television; but instead chose to hold off and put that money into the stock market instead, you wouldn't just break even. The value of your stocks would be a lot greater today than the value of that same house, car, or television. You just do not want to acknowledge anything positive about the economy.

    And you appear to still be disavowing the existance of a global economy today.

    In regard to inflation, the loss of US dollar 'purchasing power' no longer inflates US wages or price levels of strictly domestic goods and services. What it does do is inflate US prices for global commodities like food and oil / energy. This in turn inflates COSTS for certain domestic goods and services ... which may result in price inflation but more recently has resulted in loss of profit margin for US businesses trapped between rising prices for 'inputs' and US consumers unwilling / unable to buy the products or services provided by that US business if a higher price tag is attached.

    However, what's relevant to this thread is that, thanks to globalism, most MAJOR companies listed on US stock exchanges now have a significant share of their overall business operations taking place outside the USA. From Caterpillar bulldozers to Colgate toothpaste to Chevy cars, a decline in US dollar 'purchasing power' means that the US dollar equivalent local currency denominated prices of these products in Europe and Asia effectively goes up while sales levels don't drop ... which directly translates into higher profits for these US companies ... which in turn translates into higher stock share prices !!!

    What's also relevant to this thread is that newly printed money now always winds up going where the first recipients ( i.e. Wall St FED member banks ) think it will profit them the most. Some of this newly printed money will remain on deposit with the FED earning 0.25% interest with zero loss risk. Not a lot of this newly printed money will wind up going to US small business / consumer loans / mortgage, because the banks see that future loss risk ( i.e. consumer / business bankruptcies ... re-po'd collateral value losses etc. ) is high compared to probable earnings. And a formerly popular destination for newly printed money, i.e. sovereign gov't bonds of European countries, has now turned risky as well. So what's left ... Wall St. prop trading desks investing that newly printed money into globalized US companies, into globally traded commodities, etc.

    Author Charles Hughes Smith discusses the issue of currency exchange rate based 'phantom profits', and their importants to most MAJOR companies listed on US stock exchanges, at . This was written a few months ago when a rapidly rising US dollar exchange rate / 'purchasing power' relative to the Euro put a crimp on the US dollar equivalent value of offshore sales / profits, thus resulting in a US stock market decline. Author Chris Ciovacco above is speculating that the FED will soon take action to reverse this situation.

    As to whether a resumption of US dollar money printing, a coincident increase in US dollar denominated prices for commodities, imported goods, and an increase in the stock prices of globalized US companies is a 'positive' development, the answer is probably in the 'eye of the beholder'. However, if one observes that recent FED QE policy announcements have been immediately followed ( if not anticipated in advance of the announcement ) by rising US stock indexes, while resulting commodity and imported goods price increases involve a significant time delay to make their way to US checkout counters, the tactic IS effective for achieving a short term 'pop'.
    Last edited by Melonie; 08-12-2012 at 08:40 AM.

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    Default Re: Is a co-ordinated Central Bank induced Market Melt-Up Imminent ?

    Co-ordinated efforts?.... Maybe.

    One thing the Federal Reserve knows very well..... The only times since the early to mid 90's this country has experienced above average GDP growth, is when there has been large fiscal (govt.) or monetary stimulas (Federal Reserve)... And the chance of getting any govt stimulas in the next few months is mighty low.... There is no organic growth in this economy of any real size.... And that has been true for a long time.
    The country has been looted.

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    Default Re: Is a co-ordinated Central Bank induced Market Melt-Up Imminent ?

    Quote Originally Posted by Melonie View Post
    And you appear to still be disavowing the existance of a global economy today.
    No, my views are based on facts and what happens in the real world. You just make stuff up based on your ideology.

    Quote Originally Posted by Melonie View Post
    In regard to inflation, the loss of US dollar 'purchasing power' no longer inflates US wages or price levels of strictly domestic goods and services. What it does do is inflate US prices for global commodities like food and oil / energy. This in turn inflates COSTS for certain domestic goods and services ... which may result in price inflation but more recently has resulted in loss of profit margin for US businesses trapped between rising prices for 'inputs' and US consumers unwilling / unable to buy the products or services provided by that US business if a higher price tag is attached.
    Again, you're making stuff up based on what you think would happen based on your ideology. In the real world, business profits are up significantly.

    Quote Originally Posted by Melonie View Post
    However, what's relevant to this thread is that, thanks to globalism, most MAJOR companies listed on US stock exchanges now have a significant share of their overall business operations taking place outside the USA. From Caterpillar bulldozers to Colgate toothpaste to Chevy cars, a decline in US dollar 'purchasing power' means that the US dollar equivalent local currency denominated prices of these products in Europe and Asia effectively goes up while sales levels don't drop ... which directly translates into higher profits for these US companies ... which in turn translates into higher stock share prices !!!
    You're making stuff up again. Over the past year, the dollar has increased in value against the Euro, and stocks have gone up. In addition, business profit has not only increased overseas, but domestically as well.

    http://www.breakingviews.com/us-stoc...004114.article

    -snip-
    However, even narrowing the scope to just domestic activities, profitability is still startlingly strong. In the first nine months of 2011, the aggregate post-tax profit of all corporations totaled 7.2 percent of gross domestic income, a measure similar to GDP. That’s well above the cyclical peaks of 6.4 percent in 1997 and 2006 and the postwar record of 7.1 percent. In the BEA’s records, the ratio of domestic profit to GDI was only higher in 1929, at 8.8 percent. The current level is half as high again as the long-term average of 4.8 percent.
    -snip-


    Quote Originally Posted by Melonie View Post

    What's also relevant to this thread is that newly printed money now always winds up going where the first recipients ( i.e. Wall St FED member banks ) think it will profit them the most. Some of this newly printed money will remain on deposit with the FED earning 0.25% interest with zero loss risk. Not a lot of this newly printed money will wind up going to US small business / consumer loans / mortgage, because the banks see that future loss risk ( i.e. consumer / business bankruptcies ... re-po'd collateral value losses etc. ) is high compared to probable earnings. And a formerly popular destination for newly printed money, i.e. sovereign gov't bonds of European countries, has now turned risky as well. So what's left ... Wall St. prop trading desks investing that newly printed money into globalized US companies, into globally traded commodities, etc.

    Author Charles Hughes Smith discusses the issue of currency exchange rate based 'phantom profits', and their importants to most MAJOR companies listed on US stock exchanges, at http://www.oftwominds.com/blogfeb12/...ofits2-12.html . This was written a few months ago when a rapidly rising US dollar exchange rate / 'purchasing power' relative to the Euro put a crimp on the US dollar equivalent value of offshore sales / profits, thus resulting in a US stock market decline. Author Chris Ciovacco above is speculating that the FED will soon take action to reverse this situation.

    As to whether a resumption of US dollar money printing, a coincident increase in US dollar denominated prices for commodities, imported goods, and an increase in the stock prices of globalized US companies is a 'positive' development, the answer is probably in the 'eye of the beholder'. However, if one observes that recent FED QE policy announcements have been immediately followed ( if not anticipated in advance of the announcement ) by rising US stock indexes, while resulting commodity and imported goods price increases involve a significant time delay to make their way to US checkout counters, the tactic IS effective for achieving a short term 'pop'.
    And you're making stuff up again. Stocks have been going up long after the Fed's last QE. You just don't want to acknowledge anything positive about the economy. When stocks go up, instead of accepting this as a sign that the economy is improving, you make up stuff to put a negative spin on it.

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    Default Re: Is a co-ordinated Central Bank induced Market Melt-Up Imminent ?

    ^^^ Will you please stop with this silly canard that Melonie "makes things up". She does not and it has been demonstrated to you over and over again that she does not.
    She QUOTES other authors who make predictions. Who write what they think will happen based on current numbers and future projections. Many use past history to guide their thoughts and opinions.If you don't like their ideas and opinions, then take it up with them.

    If you don't like the stats and numbers used then either show that they are wrong or come up with better , more accurate numbers. I don't know of anybody on this board, not Melonie, not me , not even you, who pulls numbers out of thin air.They come from somewhere. Some sources are more reputable and have a better track record of accuracy and authenticity than others. A few, like official Chinese government numbers are suspect and subject to question. We have shown repeatedly that some U.S. Dept. of Labor employment stats can be questionable.

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    Default Re: Is a co-ordinated Central Bank induced Market Melt-Up Imminent ?

    yes, and here are the future corporate profits projections ... from





    the fairly obvious take-away is that the 'one time' boost to corporate profits which was achieved via getting rid of yet more US workers near the end of last year cannot be repeated on an ongoing basis while still allowing US corporations to function. With US corporate employment levels remaining near 'break-even' levels for the past few months, rising non-labor input 'costs' in the absence of additional labor cost reductions are indeed eroding corporate profits.

    Another fairly obvious take-away is that the 'powers that be' do NOT want to see the projected October corporate profits number drop actually being printed, since the arguable case could be made that the US economy is no better off whatsoever than it was last year. This could arguably result in an all to familiar October stock market phenomenon i.e. rapid and significant declines in stock share prices, which in turn could have VERY undesireable side effects coming just a couple of weeks prior to the upcoming US presidential election !!! For this reason pundits are speculating that, given the political impossibility of congress authorizing additional 'stimulus spending' via official gov't channels, that the FED will attempt to provide 'back door' stimulus instead.
    Last edited by Melonie; 08-13-2012 at 09:05 AM.

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